For Release Tuesday p.m., May 8, 1962.

^J^i'- ^ STATEMENT BYEVERETTE MacINTYRE, COMMISSIONER

1 - <=- FEDERAL TRADE COMMISSION-, BEFORE A MEETING OF THE

DISTRICT OF COLUMBIA BAR ASSOCIATION* ' MAY 8, 1962

ON THEADMINISTRATIVE COURT PROPOSAL

INTRODUCTION

Our good friend, Courts Oulahan, advised me that the

subject for discussion today would be:

"Whither the Federal Regulatory Agency -A frank evaluation of the current statusof Federal Regulatory Agencies and proposalsfor their reorganization or modification."

He suggested that I discuss the proposition that a Trade

Court be established with the effect of replacing the

Federal Trade Commission and perhaps other administrative

agencies. Of course he suspected that I, as others at the

Federal Trade Commission, would oppose any such proposal.

Perhaps we at the Federal Trade Commission are a bit

biased in favor of maintaining the Agency as it is. However,

I wonder whether our bias in that direction is really so great

as the bias and lack of objectivity evidenced by many of

the practicing lawyers supporting the proposal for the

establishment of administrative courts. It is clear that

bias and lack of objectivity have narrowed their perspective

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to the point that they can think of the regulation of

commerce by the Federal government only through the

adjudication of "cases and controversies" by tribunals

established as a part of the Federal judiciary. They would

empower Federal District Courts to hear claims for Social

Security benefits, veterans claims, questions under farm

legislation providing for the establishment of quotas, and

a host of other matters which must be handled from day to

day unless we are to experience a complete breakdown in the

government and suffer the pain of anarchy.

In the past the practicing lawyers who had become quite

accustomed to the law courts were biased and lacked objec-

tivity about the advent of courts of equity. However,

despite the protests, courts of equity came into being and

today are recognized as indispensable. The practicing

attorneys of this day who have become accustomed to courts

of equity would not destroy them solely for the sake of law

courts, as was proposed in the past. It is hoped that

members of the Bar who follow us will likewise see the need

and the logic for maintaining administrative regulatory

agencies.

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A CONTEXT FOR DISCUSSION

I speak as a member of the Federal Trade Commission,

a unique independent agency. Under our organic statute the

broad spectrum of American business is subject to regulation.

The authority which compels us to act is embodied in a single

sentence, constitutional in its simplicity: "Unfair methods

of competition in commerce, and unfair or deceptive acts

or practices in commerce, are hereby declared unlawful." 1/

No more specific criterion was set by the Congress,

which in its wisdom understood that "there is no limit to

human inventiveness in this field." 2/ Indeed,"a definition

that fitted practices known to lead towards an unlawful

restraint of trade today would not fit tomorrow's new inven-

tions in the field." 2/ It would be an "endless task" \J

for Congress to frame precise definitions of unfair conduct.

While the Court is the final arbiter in determining

whether any given practice is unfair, j>/ "the precise impact

of a particular practice on the trade is for the Commission,

not the courts, to determine". 6/ For it was realized that

"the point where a method of competition becomes 'unfair*

within the meaning of the Act will often turn on the exigencies

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of a particular situation, trade practices, or the practical

requirements of the business in question . . . " 2/

The great purpose of the Federal Trade Commission Act

is preventive in nature. It is, in a large sense, totally

unlike the Sherman Act under which individuals may be

imprisoned. #/ Feeling the daily pulse of business this

Commission must curb those whose unfair methods threaten

to destroy their competitors. It must stop monopoly at the

''threshold.11 2/ Small business is to be protected "against

giant competitors". 10/ Competition is to be made "stronger

in its fight against monopoly". 11/ We are not to wait

until the unhealthy situation that may give rise to a

Sherman Act criminal violation occurs, for we know at that

point the wrong may not be cured no matter how harsh the

remedy. The Commission's function is the prevention of

diseased business conditions. Mr. Justice Brandeis long ago

said:

The task of the Commission was to protectcompetitive business from further inroadsby monopoly. It was to be ever vigilant.If it discovered that any business concernhad used any practice which would be likelyto result in public injury—because in itsnature it would tend to aid or develop intoa restraint of trade—the Commission wasdirected to intervene, before any act shouldbe done or condition arise violative of theAnti-Trust Act. * * * Its action was to be

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prophylactic. Its purpose in respectto restraints of trade was preventionof diseased business conditions, notcure. 12/

It is in this context that I discuss the Trade Court proposal.

II

THE ARGUMENT FOR THE TRADE COURT

In the disposition of cases speed and a flexible pro-

cedure are important considerations. The Federal courts

have done much to expedite the handling of their docket. 13/

Administrative agencies have done comparatively little. 14/

Look, say the critics, how long it took the Federal Trade

Commission to take the liver out of Carter's pills. 1$/ The

time has come, the public and the Bar are told, to reform

the administrative agency which has failed in its primary

task, the swift, just determination of litigated matters.

To this particular breed of reformers the cure is the crea-

tion of a Trade Court. 16/ The adjudication of issues would

be removed from the Commission to the judiciary. And for >

the Federal Trade Commission some of the reformers would

have the prosecution conducted by the Department of Justice. 17/

III

A PURPOSE BEYOND SPEED ANDFLEXIBILITY: CONTINUING RESPONSIBILITY

The Trade Court proposal, although easy to understand,

rests upon faulty logic. Speed and a flexible procedure were

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not the dominant reasons for the creation of the Federal

Trade Commission. Indeed, Henderson in his authoritative

work, The Federal Trade Commission. !&/ assumed the absence

of these characteristics when he asked: "If neither perfect

justice, nor promptness and speed were the guiding con-

siderations in devising the Commission's procedure, the

reader may well ask what they were. Why was an administra-

tive procedure adopted, instead of leaving the matter to

the courts according to the traditional method?" 19/

Answering his own question Henderson stated:

The legislation was designed to protect thepublic interest in free and fair competition.It was felt that this paramount interest mightnot be adequately represented by private liti-gants or by the usual prosecuting agencies. Ina sense, of course, a court represents thepublic interest in administering a statute,but it has no continuing duty to see that thelaw is enforced. It is the court's duty todecide cases as they come before it. but ifno indictments or civil actions are brought,and the law becomes a dead letter, the courtcannot be blamed. An administrative body, onthe other hand, has a continuing responsibilityfor, results. It must ferret out violations,initiate proceedings, and adopt whatever propermethods are necessary to enforce compliance withthe law. As to the Department of Justice, it is'already overburdened with other work, and more-over it is its traditional policy to act as alitigating department, rather than as an agencycharged with discovering violations of law.Full responsibility was therefore placed in aspecialized commission, directly charged withobtaining the results which Congress desired.

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From this point of view, the FederalTrade Commission is in effect a specializedprosecuting agency, authorized to initiateand conduct proceedings in the publicinterest in a specialized and limited field.Since the Commission's order can be madeeffective only through the courts, it isperhaps more correct to say that it is anagency endowed with the faculty of creating,of its own volition, controversies overwhich the Circuit Courts of Appeals can takeoriginal jurisdiction in proper proceedings.

This is only half the story, however.The Commission is also endowed with thefaculty of making, under certain conditions,findings which the courts must respect ifthey are supported by testimony. Thisfaculty alone differentiates the Commissionfrom a mere prosecuting agency, and givesit in a limited way a judicial character.The reason for conferring upon the Commis-sion this typically judicial function musthave been that Congress expected that theproblems which would be encountered wouldbe of a technical and specialized character,calling for experience and training which acourt might not possess, but which could befound in a commission especially selectedfor the purpose, and authorized to employtechnical experts as well as lawyers forits guidance. It was doubtless the beliefof Congress that the Commission could performmore satisfactorily than a court the task ofmaking findings of fact in the special fieldover which it was given jurisdiction. 20/(Emphasis Added)

IV

THE RELATIONSHIP OF A CASE TO THETOTAL PROGRAM OF COMMISSION ENFORCEMENT

Basic to the Trade Court proposal is the assumption

that adjudication has no relationship to an agency*s total

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program. Thus, the argument runs, once a "body of law

becomes rigid it should be administered either by general

or specialized courts". 21/ Dean Nutting replied to this

proposition: "It may be more desirable to retain the admin-

istration of the definitely developed rules within the

agency as an aid to the development of its total program

than to turn them over to courts simply because they are

settled enough for courts to understand them." 22/

How right Dean Nutting isj This the Federal Trade

Commission has proved. Trade Practice Conference Rules

and Guides have been formulated for the benefit of the

businessman. 2}/ In ordinary language they define what he

may or may not do. They attempt to give precise content

to accepted law thereby forestalling unnecessary litigation.

Soon, perhaps, these tools may be supplemented by formal annouiuj

ments of Commission policy. 24/ j

Adjudication indeed is tied to the Commission's whole

regulatory process. To separate it would destroy effective

administration. "This is particularly true in instances

where the possibility of an adjudicative proceeding may

produce a compromise or other adjustments satisfactory to

the government and the parties. Such a possibility gives

the administrative agency a means of carrying out its

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policies which would not be so clearly available if the

adjudicative function were vested in a separate body." 25/

As early as 1941 this factor was recognized and

emphasized. Said the Final Report of The Attorney General's

Committee on Administrative Procedure; ". • • a separation

of functions would seriously militate against what this

Committee has already noted as being, numerically and

otherwise, the lifeblood of the administrative process —

negotiations and informal settlements. Clearly, amicable

disposition of cases is far less likely where negotiations

are with officials.devoted solely to prosecution and where

the prosecuting officials cannot turn to the deciding branch

to discover the law and the applicable policies," 26/

In its amended Rules of Practice the Federal Trade

Commission has given priority to a new method for the

informal disposition of cases. 27/ The Commission will

notify a respondent of its intention to issue a complaint,.

Specifically, a copy of a proposed complaint and order are

forwarded to the respondent. He is offered the opportunity

of settling the contested issues without a formal hearing

by negotiating a consent agreement with the Commission's

new Office of Consent Orders. He must, however, evidence

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his desire to settle within ten.days after receipt of the

proposed complaint and order. And within 30 days there-

after the agreement must be entered or else the complaint

will be formally issued. As our Chairman stated: "The

entire process of formulating consent orders has been

removed from the province of the hearing examiner. That

which occupied 70$ of the examiners* dockets has been

transferred to the staff. Clogged calendars which

facilitated delay have been substantially freed." 28/

Beyond form, the method of enforcement, there is

substance. Few litigated cases from administrative

agencies such as the Federal Trade Commission involve

solely legal questions; most contain questions of policy.

In the words of Judge Friendly, a distinguished member of

the judiciary: "The line between policy making and adjudica-

tion is altogether too shadowy to afford a basis for

separation — unless adjudication is limited to those

cases, too few to be of concern, in which the only problem

is whether the facts require the application of some

specific rule of law. And the proposal /ed. for a Trade

Court7 would destroy what is one of the greatest merits of

the administrative agency, its combination of legislative,

executive, and judicial attributes." 29/

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Consider, Judge Friendly said, the National Labor

Relations Board, an agency similar to the Federal Trade

Commission in that it is charged with preventing unfair

labor practices. The Hoover Commission deemed the finding

of an unfair labor practice as primarily a judicial act.

Judge Friendly said:

Take the problem of union-operatedhiring halls. After years of dealing withthis on the basis of investigating whetherdiscrimination was practiced in each case,the NLRB decided on a different tack. Inthe Mountain Pacific case, 31/ it announcedthat its experience had led it to concludethat any exclusive union hiring hall wasdiscriminatory unless the hall displayedprescribed signs advising applicants oftheir legal rights. Certainly this ispolicy, and it smacks of legislationrather than adjudication. But, apartfrom the question of retrbactivity, whichled the Ninth Circuit to refuse to permitits application to the past, 32/ andwithout commenting on the merits of theparticular ruling, is this not, as theCourt of Appeals intimate^ the type ofthing that agencies with expert knowledgeof and responsibility for a particularfield ought to do? 33/ Also, even whenthe. existence of an unfair labor practiceis solely a question of fact, there isthe important question of the remedy.By imposing ineffective remedies an admin-istrative court could effectively frustratepolicy, whereas by imposing penalties outof relation to the crime it might build upresentments which would lead to a demandfor legislative change that a more expertadministrator would have avoided. 34/

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V

SPEED. FLEXIBILITY. AND SELECTIVITY

As I have indicated speed and flexibility were not

the prime reasons for the creation of the Federal Trade

Commission. 35/ Yet, I have conceded that they are

important to an agency. I also concede that history

dramatizes the minimal efforts which has been expended to

bring these qualities to the administrative process. 36/

The Trade Court proponents, however, have caused inaction

to mean inherent weakness: The administrative process,

they argue, is not capable of speed and flexibility,

I answer: The fault has not been in the system, but in a

failure to make full use of the system.

At the Federal Trade Commission we have tried to

remedy the fault in part with our amended Rules of Prac-

tice and Procedure. It would, I submit, be difficult for

the judiciary to duplicate our consent decree program

where expeditious handling is a mandate. But this is not

the end of our efforts. No longer will hearings be con-

ducted at intervals. Both counsel supporting the complaint

and respondent must be prepared when the case goes to

trial. For the rules now declare: "Hearings shall proceed

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with all reasonable expedition. Unless the Commission

otherwise orders upon a certificate of necessity therefor

by the hearing examiner, all hearings will be held at one

place and will continue without suspension until concluded." 37/

To achieve this end the Hearing Examiner is required

to hold pre-hearing conferences "where it appears probable

that the hearing will extend for more than three days

. . . " 3&/ The way has been opened to bring the highly

developed Federal pre-trial techniques to the Commission.

Now discovery is the rule, not the exception.

From inception to completion speed is requisite.

Delay has been eliminated in the filing of proposed

findings, for the Hearing Examiner, except under unusual

circumstances, is required to file his initial decision

within ninety days after completion of the reception of

evidence. 39/ More, the structures of certorari have been

imposed on interlocutory 40/ as well as appeals from

initial decision. 41/ And when cases ultimately come

before the Commission 1 can assure you they will be

handled with dispatch.

Surely the administrative process is flexible enough

to treat litigated issues with speed. let, what does this

mean for the Federal Trade Commission? What do its new

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Rules of Practice imply? The answer may be summed up in

a word — selectivity. With limited manpower and limited

funds we cannot hope to police all of the vast American

economy with the weapon of a cease and desist order* Our

cases must be chosen with care, with a view toward total

enforcement of the statutes the Commission administers.

The future must see the Commission carefully ascertaining

how it may best serve the public interest. How different

this is from a prosecuting agency which might be concerned

primarily with the game of complaint statistics.

The Federal Trade Commission may not wait and chose

from the contents of daily mail deliveries. Limited

resources combined with a statutory goal to uproot unfair

practices before they become predatory will not allow

such passive action. Our Commission must plan its

activities; it must look to the future. And it was this

thought which led us to create an Office of Program Review.

We are taking a hard look at ourselves and our responsi-

bilities, which we intend to meet.

VI

IMPARTIALITY; A REASON FORTHE CREATION OF THE TRADE COURT

In December of 1956 Mr. Ashley Sellers debated the

question of the Trade Court before this Bar Association. 42/

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The administrative agency, he argued, inherently is

incapable of judging an issue impartially. Said Mr. Sellers:

"No man can be a judge in his own case. Recognition of this

principle has been in back of all the recent endeavors to

provide internal separation of functions within Federal

administrative agencies, particularly following the passage

of the Administrative Procedure Act of 1946. But internal

separation, however complete, can be no substitute for com-

plete separation. The quality of justice will be strengthened

by the extent to which we completely remove certain 'cases

and controversies' from the Federal administrative agencies

to the courts presided over by judges whose sole professional

responsibility shall be to apply and interpret the Constitu-

tion and the law to complex fact situations." 43/

For this proposition, this sweeping condemnation,

Mr. Sellers offered no evidence save an implied principle

of natural law. Perhaps, he was relying on a similar state-

ment in ,a British Committee report of the 1930's. Cited by

Professor Jaffee the report declared: " . . . the first and

fundamental principle of natural justice" is that a "man may

not be a judge in his own cause." y±/ Professor Jaffee in

1939 answered the argument in words that deserve to be

repeated:

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The Committee relies on the "principleof natural justice" that a man may not bejudge in his own cause. This, as the Commit-tee admits, traditionally has in view a mone-tary interest. But "we think it is clear thatbias from strong and sincere conviction as topublic policy may operate as a more seriousdisqualification than pecuniary interest." Itmay well be that a sincere conviction as topublic policy predisposes the mind where itmight otherwise be in a position of doubt orbalance on a conflict of fact or a choice ofapplicable principle. But to announce out ofhand that such a state of mind constitutes a"disqualification" is in part Quixotic and inpart non-sequitur. A strong and sincere con-viction as to certain laws may exist andundoubtedly often does exist in judges. Duringprohibition, for example, there must have beengreat numbers of judges who disapproved of thelaw just as many disapprove of the antitrustlaws. Juries, notoriously, may believe thatplaintiffs should recover from insured defend-ants regardless of negligence. If emotionallydetermined values constituted a disqualifica-tion, judges would be under constant attackand judicial-constitutional law non-existent.Nor is this entirely a matter of necessaryevil. Certain persons give thanks for thepredispositions of Mr. Justice Butler and cer-tain others looked upon Mr. Justice Holmes'prejudices in favor of free speech as themost precious of safeguards. The common manjuror's prejudice against insurance companiesis probably the herald of a desirable changein the accident lav;. Pecuniary interest inthe judge brings into any one litigation apurely capricious, fortuitous bias having norelation to the competing social values inthe case before him'. It does not follow thata hatred of monopoly is inappropriate in aFederal Trade Commissioner or of espionageand employer violence in a Labor Board Commis-sioner. It must be admitted that such a manis liable to find monopoly or espionage wherean indifferent man would be in doubt. Put in

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another way it might be said that presump-tions arise from special experience andconviction. Presumptions may be usefulinstruments of law reform. The administratorin daily contact with a specific sub.iectmatter — the guardian and promptor of anew, experimental social policy — does notmerely find facts; he creates new attitudestoward situations, he calls upon the personbefore him to explain why a set of factswhich arouse in him suspicion does notviolate the policy of the state. It shouldbe remembered that there is ordinarily noquestion of punishment for a past failure.In the criminal field presumptions tend tocut down constitutional protection but wherethe consequence of failure to "explain" isthe requirement of repatterning future actionwe can complain of the presumption only if itsoperation bears no reasonable relation toachieving the general statutory purpose. 45/(Emphasis Added)

711

ARTICLE III COURTS: A QUESTION OF DELEGATION

The Trade Court proponents would have established a

Constitutional rather than a legislative tribunal. As

such the requirements of Article 3 of the Constitution

take hold. The Trade Court would be permitted only to

resolve '"cases or controversies".

It £s,-well for the Trade Court proponents to refresh

their recollection as to the significant import of the

phrase, "cases or controversies". They might benefit from

recalling the language of Muskrat v. United States 46/

where the Congress attempted to obtain a judicial declaration of a

statute's validity, Mr. Justice Day for the Court held:

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/The/ judicial power . . . is the rightto determine actual controversies arisingbetween adverse litigants, duly institutedin courts of proper jurisdiction. The rightto declare a law unconstitutional arisesbecause an act of Congress relied upon byone or the other of such parties in deter-mining their rights is in conflict with thefundamental law. The exercise of this, themost important and delicate duty of thiscourt, is not given to it as a body withrevisory power over the action of Congress,but because the rights of the litigants injusticiable controversies require the courtto choose between the fundamental law anda lav/ purporting to be enacted within con-stitutional authority, but in fact beyondthe power delegated to the legislativebranch of the Government. This attemptto obtain a judicial declaration of thevalidity of the act of Congress is notpresented in a "case" or "controversy",to which, under the Constitution of theUnited States, the judicial power aloneextends. It is true the United Statesis made a defendant to this action, butit has no interest adverse to the claimants.The object is not to assert a propertyright as against the Government, or todemand compensation for alleged wrongsbecause of action upon its part. Thewhole purpose of the lav; is to determinethe constitutional validity of this classof legislation, in a suit not arisingbetween parties concerning a propertyright necessarily involved in the decisionin question, but in a proceeding againstthe Government in its sovereign capacity,and concerning which the only judgmentrequired is to settle the doubtful char-acter of the legislation in question.Such judgment will not conclude privateparties, when actual litigation bringsto the court the question of the con-stitutionality of such legislation. Ina legal sense the judgment could not be

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executed, and amounts in fact to no morethan an expression of opinion upon thevalidity of the acts in question. Confiningthe jurisdiction of this court within thelimitations conferred by the Constitution,which the court has hitherto been carefulto observe, and whose boundaries it hasrefused to transcend, we think the Congress,in the act of March 1, 1907, exceeded thelimitations of legislative authority, sofar as it required of this court actionnot judicial in its nature within themeaning of the Constitution. 47/

What is the nature of a Commission cease and desist

order? Is it the same as a judicial decision? In Federal

Trade Commission v. Cement Institute 4J|/ the Supreme Court

considered, inter alia, the admissibility of certain

evidence. It held that " . . . administrative agencies

like the Federal Trade Commission have never been re-

stricted by the rigid rules of evidence . . • And of course

rules which bar certain types of evidence in criminal or

quasi-criminal cases are not controlling in proceedings

like this, where the effect of the Commission's order is

not to punish or to fasten liability on respondents for

past conduct but to ban specific practices for the future

in accordance with the general mandate of Congress.11 49/

The Commission concerns itself with the future. The

past is of value only to the extent that it serves as a

guide of what will be, for the Commission's task is to

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convert actual legislation from a static into a dynamic

condition. A court, on the other hand, is concerned

primarily with the past, with dispensing justice for the

wrongs that have been done. Long ago the Seventh Circuit

made this clear in Sears. Roebuck & Co. v. Federal Trade

Commission 50/ when it held:

With the increasing complexity ofhuman activities many situations arisewhere governmental control can be securedonly by the "board" or "commission" formof legislation. In such instances Congressdeclares the public policy, fixes thegeneral principles that are to control,and charges an administrative body withthe duty of ascertaining within particularfields from time to time the facts whichbring into play the principles establishedby Congress. Though the action of theCommission in finding the facts anddeclaring them to be specific offensesof the character embraced within thegeneral definition by Congress may bedeemed to be quasi legislative, it isso only in the sense that it convert'sthe actual legislation from.a staticinto a dynamic condition. But the con-verter is not the electricity. And thoughthe action of the commission in orderingdesistance may be counted quasi judicialon account of its form, with respect topower it is not judicial, because a judicialdetermination is only that which is embodiedin a judgment or decree of a court and en-forceable by execution or other writ of thecourt. 51/

The Federal Trade Commission in the language of the

law acts in both a quasi-legislative and quasi-judicial

capacity in deciding any issue. One function cannot be

separated from the other. A court has but one character-

istic; it may treat only that which is judicial, a case or

a controversy. The structure of our Government will permit

nothing else. The Congress, the President, and the Judiciary

each have their separate obligations. A check and balance

system requires each to stay within its 'proscribed area of

authority. An Article III Court constitutionally is incapable

of assuming the adjudicatory duties of the Federal Trade

Commission. Its proponents would gain much from restudying

Humphrey's Executor v. United States. 52/ The President

unsuccessfully tried to fire an FTC Commissioner. Denying

the President this right the Court declared:

The Ccrrjiission is to be nonpartisan; andit must, from the very nature of itsduties, act with entire impartiality.It is charged with the enforcement of nopolicy except the policy of the law. Itsduties are neither political nor executive,but predominantly quasi-judicial and quasi-legislative. Like the Interstate CommerceCommission, its members are called upon toexercise the trained judgment of a body ofexperts "appointed by law and informed byexperience". Illinois Central R. Co. v.Interstate Commerce Conun'n., 206 U.S. 441,454; Standard Oil Co. v. United States.283 U.S. 235, 238-239. £27

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VIII

A QUESTION OF ENFORCEMENT

President Roosevelt sought the dismissal of Commis-

sioner Humphrey, said one source, because his militant

"trust-buster" policy would have been seriously crippled

if the Commission were controlled by the deciding voice

of a friend of big business. 54/ This, it was contended,

dramatically illustrated the need to vest enforcement of

Commission law in the Executive, specifically, in the

Department of Justice. 55/ Responsible action can only

come, the argument runs, under the general managership of

the President. To the Humphrey illustration Professor

Jaffe pointedly replied:

Subsequent events have so laced upthis particular situation with irony thatit is difficult to keep the requisitestraight face in considering it. TheCommission was indeed won over to trust-busting when the President became veryshortly enamoured of the NIRA and nowthe Department of Justice, at least inthe person of Thurman Arnold, is directlyopposed to the Commission's trust-bustingphilosophy. There is undoubtedly in theGovernment no coordinated antitrust policy.The President has not yet formulated one,the country has not and Congress has not.In the meantime in so far as the law speaks,the Commission rather than Mr. Arnold seemsto express its obvious sense. Would it inthis juncture be such a gain if the Presi-dent were empowered to silence the tongueand stay the hand of the Commission? Isuggest that the theory of the "generalmanager" will not provide the answer, 56/

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Indeed, it is interesting to note the careful

deliberations which Congress gave the issue of enforcement

when the Federal Trade Commission Act was under considera-

tion. Powerful leaders were disillusioned with Justice

Department prosecution; the public interest to them was

not being served. They spoke of the possibility of

relieving the Justice Department of its antitrust duties.

In 1914, Senator Newlands declared:

"I am attacking this system of turningover the administration of our legislationregarding interstate trade to the AttorneyGeneralfs office or to courts, when weshould create a great administrativetribunal like the Interstate CommerceCommission, charged with powers over inter-state trade similar to those possessed bythat tribunal regarding transportation. . .if such a commission had been organized23 years ago when the antitrust law was passed,these vast accumulations of menacing capitalwould have been prevented, that all theadvantages of combination of capital wouldhave been secured without the attendantabuses, and that we would have been savedthe economic wrench that is now to takeplace through the dissolution of these giantcombinations and the restoration of theirconstituent elements. /

"I was at first inclined following theviews which I have frequently expressed toinclude a provision transferring the enforce-ment of the Sherman Antitrust Act from theAttorney General*s Office to this commissionfor the reason that prior to the administra-tion of the present incumbent the enforcement

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of the Sherman Act was fitful, subject topolitical influences, and likely to beaffected by any political or financialexigency. But as the Attorney Generalfsoffice is now proceeding . . . to breakup the existing trusts, I thought it bestnot to complicate the work of the newcommission with the administration of theSherman Act. 58/

DC

CONCLUSION

For almost fifty years the Federal Trade Commission

has existed. From the mistakes which were made, and there

have been many, lessons have come. We can learn from the

past. It was this view which led the Federal Trade Commis-

sion to adopt its new Rules of Practice and Procedure. Yet,

the task of creating an ever more effective Commission did

not end here. Indeed, it will never end. We must always

undergo the process of introspection, of looking within

ourselves to our failings so that they may be cured. In

this endeavor the Bar can and should be of assistance.

Mr. Free.r, a former Chairman of the Federal Trade Commis-

sion, put it this way:

It is to be hoped that the legal pro-fession shall not be so foolhardy as toperennially attempt to refight a lost causeon an old battlefield in the hope that todo so may some day change the decision.Such efforts are foredoomed to failure.The administrative process is here to stay.

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While it may not always be consistentwith the "distinguished minds of lawyers",its response to the "need of the countryin order to give relief to its people" isunquestioned. All of our efforts shouldbe concentrated in a united effort toimprove the administrative process ratherthan by recurring attacks to destroy itslong established and beneficial role ofdetermining proper relationship betweenthe government and its citizens in theWorld's greatest political and economicdemocracy. 59/

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FOOTNOTES

1/ 36 Stat. 717 (1914), as amended, 52 Stat. Ill (193$),15 U.S.C. § 41 (1956).

2/ Federal Trade Commission v. R. F. Keppel & Bro.,291 U.S. 304, 310-12 (1933).

3 / Federal Trade Commission v. Cement Institute,334 U . S . 683, 669-90 (1946).

hj 291 U . S . at 310-12.

Federal Trade Commission v. Gratz, 253 U.S. 421 (1920).

6/ Federal Trade Commission v. Motion Picture AdvertisingService Co., 344 U.S. 392, 396 (1953).

2/ Ibid.

6/ United States v. McDonough Co., 160 F. Supp. 511(S.D. Ohio 1959). Four officials of hand implement manu-facturing concerns were each sentenced to 90 days in jail.One took his life. Time, Dec. 21, 1959, p. 76.

Federal Trade Commission v. Raladam Co., 263 U.S.i, 650 (1931).

10/ Ibid.

11/ Ibid.

12/ Federal Trade Commission v. Gratz, 253 U.S. 421,dissenting opinion, at 435.

13/ Address of Hon. Irving R. Kaufman, Judge, United StatesDistrict Court, Southern District of New York, at the 12thAnniversary Dinner of the Federal Trial Examiners Conference,Silver Spring, Maryland, May 7, 1959. The development ofeffective pre-trial techniques was the concrete exampleoffered by Judge Kaufman. In the hands of the judiciary ithas become a potent weapon for expediting cases. In thehands of the agency, the Judge argued, it has been but littleused.

14/ Id. at 12: "If there is anything which symbolizes thedisillusion of the proponents of the administrative agencyit is the factors of delay, expense and volume of record.The agencies, it was proclaimed, would avoid the outmodedrigidities of the courts; they would do what it was believedthe courts could never do — have flexible procedures whichwould afford speedy determinations. The courts took thesecriticisms to heart and they went and proved that they couldmeet the challenge of modern day litigation. The shoe is nowon the other foot and we are all waiting to see if the agenciescan rise to the challenge."

See also, Bond, The Use of Pre-Trial Technigues inAdministrative Hearings, 73 F.C.C. Bar J., 55, 5o-57 (1953):"The uncomfortable truth is that whereas the processes of thecourts were being rapidly improved and expedited, the hearingprocesses of the agencies and departments of the federalgovernment remained virtually at a standstill."

f/ Sixteen years were consumed in the litigation of CarterProducts, Inc. v. Federal Trade Commission, 26S F.2d 461(9th Cir. 1959), cert, denied. For comments relating to pro-longed litigation see, Friendly, A Look At The Federal Admin-istrative Agencies, 60 Colum. L. Rev. 429, 433 (I960).

16/ An excellent article on the question of the Trade Courtwas written by Robert E. Freer, former Chairman of the FederalTrade Commission, Freer, The Case Against The Trade RegulationSection Of The Proposed Administrative Court, 24 Geo. Wash.L. Rev. 637 (1956). Mr. Freer developed the background forthe Trade Court proposal. Id. at 640: "The present attackemanates from two sources. The first is the Commission onOrganisation of the Executive Branch of the Government, morefamiliarly known as the Hoover Commission. In a Report onLegal Services and Procedure the Hoover Commission recommendedthe establishment of an Administrative Court of the United .,States, with a number of sections, including a fTrade Section §which should have the limited jurisdiction in the trade regu-lation field now vested in the Federal Trade Commission, theInterstate Commerce Commission, the Federal CommunicationsCommission, the Civil Aeronautics Board, the Federal ReserveBoard, the United States Tariff Commission, the Federal PowerCommission, the Department of the Interior, and the Departmentof Agriculture.1 (1)/

"The Hoover Commission report was based almost entirelyupon a subsequently published report of its Task Force on LegalServices and Procedure. (2)/ !

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16/ (Continued)

"The second source of the present movement is a groupwithin the organized bar. In a report of January 31, 1956,a Special Committee on Legal Services and Procedure of theAmerican Bar Association recommended that a specializedcourt be created with 'limited jurisdiction in the tradepractice field with respect to certain powers now vestedin the Federal Trade Commission and in certain otheragencies.1 (3)/ The recommendations of the Special Commit-tee were approved by the House of Delegates of the AmericanBar Association at the mid-winter meeting held in February1946."

(1)/ Commission On Organization of the ExecutiveBranch of the Government, Report On Legal Servicesand Procedure, Recommendation No. 51, 87-88 (1955).

(2)/ Commission On Organization of the ExecutiveBranch of the Government, Task Force Report OnLegal Services and Procedure (1955)* Although theTask Force Report was prepared earlier, publicationwas, apparently for tactical reasons, delayed untilafter publication of the Hoover Commission Report.

(3)/ Report of the Special Committee On LegalServices and Procedure To The 1956 Midyear Meetingof the House of Delegates 42 (1956).

17/ Id. at 641-42. "What authority would remain with theFederal Trade Commission under the Hoover Commission andAmerican Bar Association recommendations is not clear.However,, under the Task Force recommendations, the Commissionwould lose not only its adjudicative authority but also, byreason of a smooth piece of verbal legerdemain, (1)/ itsauthority to prosecute complaints. While, under Section 4of the amendments to the Judicial Code, the Commission wouldhave authority to file petitions in the Administrative Court,it is evident that under Section 412 of the 'Legal ServicesAct', Commission cases before the Court would be presentedand argued by the Attorney General, (2)/ for the appointmentof the chief legal officer of the Federal Trade Commission isnot made 'pursuant to specific statutory authority' but ratherunder the general authority in section 2 of the Federal TradeCommission Act 'to employ the fix the compensation of suchattorneys . . . as it may from time to time find necessaryfor the proper performance of its duties. . . . * {"})/

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I17/ (Continued)

"The adoption of the proposal for a transfer away fromthe Federal Trade Commission of its authority under Section 5of the Federal Trade Commission Act and Section 11 of theClayton Act would relegate the Commission to the status ofthe 'Bureau of Corporations' which existed prior to 1914 andits predecessor, the 'Industrial Commission*. This backwardstep would be a serious blow to the people of this countryand particularly to small businessmen throughout the landwho have come to depend upon the Federal Trade Commissionfor protection against monopolistic practices.

"The worth of the Commission, as demonstrated in the pastand its vast, untested potential for greater future servicemakes particularly alarming the fact that so many of the veryfine people of unquestioned integrity who served on the HooverCommission and on the Special Committee of the American BarAssociation support the proposed Trade Regulation Court. Noless alarming is the possibility that this undesirable change,which had its genesis in the legal profession, may by defaultbe conceded to have the undivided support of the profession,for it appears that only one side of the picture has thus farbeen presented. (4)/"

(1)/ "In any proceeding before the AdministrativeCourt, or any Section, division^^r judge thereof,the United States shall be represented either bythe chief legal officer of the fgQncy whichinitiated the proceeding, if his^apjiointment wasmade pursuant to specific statutory authoritytherefor, or by the Attorney General." TaskForce Report 3&1.

(2)/ This has escaped the notice of other com-mentators who have assumed that the FederalTrade Commission and other regulatory commis-sions would become prosecutors. Note the con-clusion: "Thus, in effect, administrativeagencies would become essentially prosecutingauthorities in their respective fields bringingactions before the appropriate sections of theadministrative Court."

Impact of Proposed Administrative Code,23 ICC Prac. J. 23 11955). See also ABA Report44: ". . . the administrative agency . . . canpresent all relevant factors for considerationby the specialized court."

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r 17/ (Continued)

(3)/ 15 U.S.C. § 42 (1952).

Voices advocating caution are, however,beginning to be heard. Fuchs, The HooverCommission and Task Force Reports on LegalServices and Procedure, 31 Ind. L.J. 1 (1955),and Nutting, The Administrative Court, Sym-posium on Hoover Commission, 30 N.Y.U.L. Rev.13S4 (1955).

13/ Henderson, The Federal Trade Commission (1925).

12/ Id. at 91.

20/ Id. at 91-92. The author repeated this position in hisconcluding chapter: ". . . it was desired that the Commissionshould represent the public interest, and should be in aposition to take the initiative in behalf of the public,where private parties might prefer to let matters rest. Inpart, also, it was because the legislators feared that theCommission would be overwhelmed with a host of petty squabbles,and therefore provided that the formal machinery of the Commis-sion could be set in motion only by the Commission itself,where the case seemed to be of sufficient importance. I canconceive of no other valid reasons than the two which I havementioned. Certainly the procedure was not adopted becauseit was desired to subject the persons complained of to thejurisdiction of a tribunal which would be predisposed to ruleagainst them." Id. at 329.

21/ Nutting, The Administrative Court, 30 N.I.U.L. Rev.T384, 13$7 (1955).

22/ Ibid.

23/ These techniques were praised by Landis, Report onRegulatory Agencies to the President-Elect (I960). Anti-deceptive Guides issued by the Commission include CigaretteAdvertising Guides (1955); Guides against Deceptive Pricing(1953); and Guides for Advertising Fallout Shelters (1961).Guides also have been issued interpreting Sections 2(d) and(e) of the Amended Clayton Act. Guides for AdvertisingAllowances and Services (May 19, I960).

24/ See my address, "Uncertainties Under Our AntimonopolyLaws", before the Winter Conference of the American MarketingAssociation, New York, N.I., Dec. 27, 1961.

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2j>/ Nutting, The Administrative Court, 30 N.Y.U.L.Rev.I384, 13^7 (1955).

26/ Final Report of The Attorney-General's Committee onAdministrative Procedure, 5^-59 (1941). The report continued:"These factors are thrown into clear relief if it is recalledthat the statutory prohibitions which administrative agenciesare commonly called upon to enforce are not and cannot be asclear and precise as a promissory note or bill of sale. Theynecessarily describe in general terms, and with emphasis upontendency or effect, those practices which are forbidden.It is and must be left to the administrative agencies to applythese general prohibitions to a great variety of conduct. Asthis is done, it is expected that the general terms will takeon concreteness and that subsidiary principles may be workedout by which certain types of conduct will be known as im-proper and others as permissible. To do this involves theinvestigation of many informal complaints and the settlementby agreement of many situations where the practices may havebeen innocently or inadvertently or not consistently engagedin. To divorce entirely the investigating and enforcing armfrom the deciding arm, may well impart additional confusionto this process. Even in the field of taxes, where histori-cally the aim has been at precision, some confusion resultsfrom the separation of the collecting officials from thedeciding officials. In many claims one person may take oneview and another person a different view of the meaning of astatute, with resultant uncertainty and hardship for sometaxpayers until the matter has been straightened out in thecourts. The danger is even greater with statutes whosecontent is rore vague. It seems most desirable that withinthe administrative field itself, interpretations should nothave to be evolved by a series of litigations in which theenforcing branch endeavors to ascertain the mind of thedeciding" branch. For this vrould result, not merely in addeddifficulty of enforcement, which might be warranted if itwere necessary to assure fairness, but in added burdens uponmany private interests, who would be unnecessarily harassedby complaints and trials." [Emphasis added.] ibid.

22/ 16 C.F.R. § § 3.1 - 3-4 (July 6, 1961).

28/ Chairman Dixon, "The Federal Trade Commission in 1961",before the section on antitrust law of the New York State BarAssociation, New York, N.Y., Jan. 25, 1962, at 3.

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29/ Friendly, A Look at the Federal Administrative Agencies,W Colum. t. Rev. 429, 441 (I960).

30/ Commission on Organization of the Executive Branch oftKe Government, Legal Services and Procedures - A ReportTo The Congress, &7 (1955)•

31/ Mountain Pac. Chapter, 119 N.L.R.B. 8$3, 393 (1957).

W2/ N.L.R.B. v. Mountain Pac. Chapter, 270 F. 2d 424, 432th Cir. 1959).

33/ See Mr. Justice Frankfurter's opinion in SEC v. CheneryCorp., 313 U.S. SO, 92-93 (1943).

Friendly, A Look At The Federal Administrative Agencies,Colum. 429, 442-43 (I960).

35/ See Part III, supra.

36/ Henderson, The Federal Trade Commission, 337 (1925).Judge Friendly wrote: " . . . I wonder whether law studentsstill are taught, as we were, to contrast the celerity ofthose Mercury-like and wing-footed messengers, the adminis-trative agencies, with the creeping and cumbersome processesof the courts. If they are, they have a rude awakeningahead, on both counts. To borrow Mr. Churchill's phrase,the regulatory agencies often tolerate delays up with whichthe judiciary would not put." Note 34, supra, at 432.

XL/ 16 C.F.R. I 4.14 (d) (July 6, 1961).

33/ 16 C.F.R. §4.3 (July 6, 1961). The matters which mustbe considered in the conference include " (1) simplificationand clarification of the issues; (2) necessity or desira-bility of amendments to pleadings, subject, however, to theprovisions B 4.7 (a)(l); (3) stipulations, admissions of factand of the contents and authenticity of documents; (4) expedi-tion in the presentation of evidence, including, but notlimited to, restriction of the number of expert, economic ortechnical witnesses; and (5) such other matters as may aid inthe orderly disposition of the proceeding, including disclosureof the names of witnesses or furnishing for inspection orcopying of non-privileged documents, papers, books or otherphysical exhibits, which constitute or contain evidencerelevant to the subject matter involved and which are in thepossession, custody or control of any party to the proceeding."ibid.

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16 C.F.R. I 4.19(a) (July 6, 1961).

40/ 16 C.F.R. I 4.1# (July 6, 1961). For both appeals frominterlocutory rulings and initial decisions permission mustbe obtained from the Commission. The form for obtainingthis is a petition for leave to appeal which must not exceedten pages. For interlocutory appeals it must be shown tothe satisfaction of the Commission "(1) that the rulinginvolves a novel and substantial question of law which isnot controlled by prior decisions of the Commission or thecourts, and (2) that a determination of such question couldproperly be made by the Commission without reference toevidentiary or other matters of record in the proceeding,and (3) that an immediate determination by the Commissionmay materially advance the ultimate termination of theproceeding and would be in furtherance of the Commission'spolicy to prevent unnecessary delay." 16 C.F.R. I 4-l8(a).

ifc/ 16 C.F.R. I 4.20(b) (July 6, 1961): "The petition forreview shall concisely and plainly state (1) the questionspresented for review, (2) the facts in abbreviated form, and(3) the reasons why review by the Commission is deemed tobe in the public interest . . . "

23 J. of D.C.B.A. 703 (1956).

jf Id. at 706. Mr. Sellers prefaced his remarks bystating: "Also under our system of Government, it is notonly important for an individual to receive justice, butalso for him to be assured that he is being dealt withimpartially.

"I believe that the end of all Government should bethe welfare of the individual. Whenever we authorize aFederal agency to decide a case or controversy, the personaffected loses some of the protection he would have if acourt v;cre to decide the case, or at least the personaffected frequently believes this to be true." id at 705-706. Query: Y/ithin the confines of due process is not thepublic interest the dominant interest of this nation?

hh_/ Jaffeca Invective and Investigation In Administrativelav/, 52 Harv. L. Rev. 1201, 1218 (1939).

Id. at 1218-20.

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219 U.S. 346 (1911).

Id. at 361-62.

333 U.S. 6S3 (194S).

49/ Id. at 705-06. See, In the Matter of Manco WatchStrap Co., Dkt. 77&5 (March 13, 1962) where the Commissionutilized the decision making process to advice "hearingexaminers and counsel . . . concerning the requirements ofproof in cases of this type arising in the future."

£0/ 25S Fed. 307 (7th Cir. 1919).

Id. at 312.

£2/ 295 U.S. 602 (1935).

3 Id. at 624. See also, Federal Trade Commission v.'R.F. Keppel & Bro., 291 U.S. 304, 3 H (1934): "While thisCourt has declared that it is for the courts to determinewhat practices or methods of competition are to be deemedunfair, Federal Trade CommTn v. Gratz, supra, in passing onthat question the determination of the Commission is ofweight. It was created with the avowed purpose of lodgingthe administrative functions committed to it in "a bodyspecially competent to deal with them by reason of information,experience, and careful study of the business and economicconditions of the industry affected," and it was organizedin such a manner, with respect to the length and expirationof the terms of office of its members, as would "give to theman opportunity to acquire the expertness in dealing withthese special questions concerning industry that comes fromexperience." Report of Senate Committee on InterstateCommerce, No. 597, June 13, 1914, 63d Cong., 2d Sess.,pp. 9, 11. See Federal Trade Comm'n v. Beech-Nut Packing Co.,supra, at 453; compare Illinois Central R. Co. v. InterstateCommerce Comm»n, 206 U.S. 441, 454."

54/ President's Committee on Administrative Management,Report With Special Studies, 221 (1937), cited by Jaffe,Invective and Investigation in Administrative Law, 52Harv. L. Rev. 1201, 1240-41 (1939).

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Very recently the suggestion has been made to transfertffe Commissions antitrust enforcement duties to theDepartment of Justice. Landis, Report on RegulatoryAgencies to the President-Elect, 51-52 (I960).

56/ Jaffe, Invective and Investigation in Administrativelav/, 52 Harv. L. Rev. 1201, 1241 U939).

22/ 47 Cong. Rec. 1227 (1911). j

53/ 47 Cong. Rec. 2621 (1911).

59/ Freer, The Case Against The Trade Regulation Section ofthe Proposed Administrative Court, 24 Geo. Wash, L. Rev,637, 655 (1956).